Even more surprising, the top-performing endowments over 10 years among all schools reporting data weren’t giants like Harvard and Stanford or even Yale, known for its pioneering “Yale method” — investing in so-called alternative assets like hedge funds and private equity rather than just stocks and bonds. The Nacubo-Commonfund study does not publicly disclose the identities of schools in the rankings, but people who know the results told me the top-performing colleges are two Virginia universities whose financial resources amount to a negligible fraction of the typical Ivy League endowment.

Radford University, which ranked first, has an endowment of $55.5 million, and Southern Virginia University, which was second, has an endowment of just $1.1 million. (Taken together, that’s 0.15 percent of Harvard’s endowment, the largest in the country, which is $37.6 billion.)

It’s as if Lebanon Valley College, the smallest school (enrollment 425) ever to reach the Sweet 16 (in 1953), were to win an N.C.A.A. basketball championship.

The giant endowments still lead over 10 years, with annualized returns of 7.2 percent compared with 6 percent for the smallest endowments. But the gap is narrowing.

Both Radford and Southern Virginia — which, coincidentally, are 90 miles from each other in southwest Virginia — have weathered good and bad markets, including the financial crisis and the recent bull market. Radford’s annualized 10-year return is 12.4 percent, and Southern Virginia’s is 11.2 percent. For the most recent fiscal year, 2015, Radford earned over 13 percent and Virginia Southern’s return was 10.5 percent. The average return last year for all endowments was just 2.4 percent.

Southern Virginia achieved those results by investing in individual stocks and low-cost index funds. It has no exposure to so-called alternative investments — expensive hedge funds, private equity and venture capital funds. Indeed, the main reason the smallest endowments have been catching up to the biggest funds is that most of them — like most individual investors — can’t afford or get access to most alternative strategies.

Radford is something of an anomaly, since 80 percent of its endowment is co-invested with a fellow Virginia institution, the much wealthier University of Richmond. But Radford has significantly outperformed Richmond, which, like other $1 billion-plus endowments, has a large allocation to alternative investments.

According to the latest Nacubo-Commonfund study, hedge funds, private equity and other alternative strategies make up a record 57 percent of the assets held by endowments over $1 billion, and just 11 percent for endowments under $25 million.

The largest endowments continue to plow money into these alternative assets, even though many of them have consistently underperformed stock market indexes like the Standard & Poor’s 500-stock index or a simple mix of stocks and bonds. Last year, hedge funds lost 0.85 percent on average, according to the research firm HFR. The S.&P. did slightly better, declining 0.73 percent. Including dividends, the index gained 1.2 percent.

The biggest endowments have long maintained that their size and prestige give them access to the top-performing hedge funds, private equity managers and venture firms, something that smaller schools can’t replicate. That may still be the case, but the success of small endowments like Southern Virginia’s suggest that they can outperform even their largest and most prestigious rivals by sticking to lower-cost strategies.

“I’ve thought about alternatives, but I’m not that interested,” said Jesse Seegmiller, who is both the controller and chief investment officer at Southern Virginia in Buena Vista, Va. “I have problems with even calling alternatives an investment class. There’s really only equities and debt — everything else is a subset of those.”

Southern Virginia was once a private women’s college, best known for its equestrian program. In its heyday in the 1960s, the school won many national riding titles. But like many women’s colleges, it struggled, even after admitting men in the 1990s. In 1996, after losing its accreditation, the school was revived as a liberal arts college by members of the Mormon Church. Today the school describes its mission as serving the “community of Latter Day Saints,” although it welcomes “all who share our values” and is not affiliated with the Mormon Church. Its enrollment is just over 700 students.

As a matter of policy, tuition is relatively low (for a private college) at $14,900 a year, so many costs are covered by annual giving. Unlike many schools with larger endowments, which typically spend 5 percent of the endowment value each year, Southern Virginia doesn’t draw on its endowment to fund current operations, which Mr. Seegmiller sees as an advantage.

“We can take a very long-term view,” he said. The school’s asset allocation is 80 percent equities and 20 percent cash and fixed income, a relatively aggressive concentration in more volatile but higher-return equities, which has paid off during the bull market that began in 2009.

A native New Yorker whose nomadic career has taken him from Citigroup to the Maine Public Utilities Commission to Singapore and then to St. George, Utah, Mr. Seegmiller was looking to buy a business in Virginia when he dropped by to see Southern Virginia and ended up staying. (Both he and his wife are Mormons.) He took over the endowment in 2008 during the depths of the financial crisis. Fortunately for the school, most of its endowment then was in certificates of deposit. Mr. Seegmiller moved into equities, which “was a no-brainer time to invest in stocks,” he said.

Southern Virginia’s endowment is unusual among small endowments in that it does not rely on outside advisers. For exposure to bonds and international stocks, the school uses low-cost exchange-traded funds. For United States stocks, Mr. Seegmiller chooses individual securities, aiming for a relatively concentrated portfolio of 15 to 20 stocks.

“I like to concentrate on my best ideas.” he said. He subscribes to the “growth at a reasonable price” philosophy, which has led him to positions in Apple and Gilead Sciences. Among his biggest gains are Gilead, Tractor Supply, LKQ Corporation, FactSet Research Systems and Roper Technologies.

Radford is a public state university with an enrollment of just under 10,000 students whose endowment is overseen by a private foundation with its own board and investment committee. Since 2009, the foundation has outsourced most of the endowment management to Spider Management, which is the investment office for the University of Richmond and a few other nonprofits.

The foundation directly invests 20 percent of the endowment’s assets, and a committee of students with faculty oversight invests a smaller portion of the endowment, currently more than $1 million.

By piggybacking on Richmond’s $2.3 billion endowment, Radford has a substantial position in alternative assets. But Richmond’s endowment return for the 2015 fiscal year was 6.3 percent — less than half of Radford’s — and its annualized 10-year return is 9.7 percent. John Cox, executive director of the Radford Foundation, attributed the difference to the 20 percent directly managed by the foundation, which posted very strong returns last year thanks to “some additional unique private investments,” Mr. Cox said, without identifying them.

Whether Radford and Southern Virginia can hold on to their top rankings remains to be seen, given this year’s treacherous markets, but they’ve already demonstrated that small size is no obstacle to superior performance. And Southern Virginia proves that exotic and costly alternative strategies don’t necessarily produce better results than a simple focus on low-cost stocks and bonds.

“Even a small cost advantage gets compounded every year into a larger and larger number,” said Daniel W. Wallick, a principal in Vanguard’s Investment Strategy Group, which has long advocated a low-cost, diversified approach to money management. “We’ve looked at one-, three-, five- and 10-year comparisons, and a simple balanced fund of equities and fixed income has outperformed in every period. We’re not seeing much change in strategy at the largest endowments, but a lot of medium and small endowments are questioning the wisdom of the Yale model.”

Maybe one day we’ll be reading about the Southern Virginia model.

A version of this article appears in print on , on Page B1 of the New York edition with the headline: In College Endowments, the Davids Beat the Goliaths. Order Reprints | Today’s Paper | Subscribe

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